Is Ethereum on the Rise?
Bitcoin may have been the first cryptocurrency, but it’s certainly not the last. Smart investors should be on the lookout for others with more features and faster transaction times, ones that could easily mimic the rise of Bitcoin (BTC) prices.
The most notable of these is Ethereum (ETH).
Ethereum is easily the most talked-about cryptocurrency after Bitcoin, despite being less than two years old. Its newfound fame is probably due to the 13,633% gain since September 2015.
Anyone who had invested $1,000 at that time would have $137,330.00 in their pockets right now.
A lucky few made that bet. But don’t despair, because the Ethereum price prediction still has enormous upside potential.
The Bitcoin price prediction, on the other hand, is getting a little stale. No doubt that statement will infuriate Bitcoin fanatics everywhere, but it should not be controversial. The math says it all.
If we see Bitcoin jump $1,000 in the next six months, investors would only make 43.8% returns. That’s because Bitcoin is already priced at $2,283!
Investors have already drained it of profit, which means further gains would be hindered by “starting from a high base.” Newer cryptocurrencies, by contrast, start from a “low base.”
None of this changes the fact that Bitcoin has made people very rich. I am not trying to discredit the enormous gains that Bitcoin provided to its earliest supporters. To do so would be ridiculous.
I know full well that early Bitcoin miners turned $100.00 into $72.9 million, and in only seven years!
There are few, if any, investments that could match those kinds of returns, so I don’t want to sound disparaging.
Unfortunately, that does nothing for investors who stayed out of Bitcoin. Even if they lock in at this moment, it would take a miracle for them to accumulate triple-digit returns.
That’s why investors must look to younger cryptocurrencies.
How Other Cryptocurrencies Stand Against Bitcoin
The market for cryptocurrencies is growing rapidly.
To speed it along, key industry players have developed a pipeline for new currencies. It looks a lot like the stock market’s pipeline for new companies.
For instance, companies go public through an initial public offering (IPO).
This grants them a ticker symbol, like “AAPL” for Apple Inc., or “FB” for Facebook Inc. Investors then buy shares of the company on whatever exchange the company decided to list.
Cryptocurrencies developed a similar process of going public called an initial coin offering (ICO). (Source: “The Initial Coin Offering, the Bitcoin-y Stock That’s Not Stock—But Definitely a Big Deal,” Wired, March 16, 2017.)
ICOs are basically crowd sales for companies whose business models require the native use of a token (otherwise known as a cryptocurrency). Think of Kickstarter or Indiegogo, but throw Bitcoin into the mix and…voilà. You have yourself an ICO.
If this experiment proves successful, it will threaten the entire venture capital business. Startups could directly reach (and have been reaching) average investors through the brilliance of blockchain currencies.
In the last two years, for instance, the ICO market volume eclipsed Bitcoin’s market cap.
This means Bitcoin is facing increasing competition from new cryptocurrencies, many of which are more versatile and computationally more powerful. Here are some of the biggest threats.
|Symbol||Name||Market Cap||Price||1-Year Return|
|XEM||New Economic Movement (NEM)||$2.31B||$0.257||14,998%|
(Source: “CryptoCurrency Market Capitalizations,” CoinMarketCap, last accessed May 23, 2017.)
Any of these cryptocurrencies could give Bitcoin a run for its money. However, the overwhelming majority of analysts would tell you that Ethereum stands the best chance.
Why is that?
Ripple is in bed with the banks. Monero is a favorite of black market dealers. NEM is selling itself as an updated Bitcoin. What makes Ethereum so special?
Answer: Smart Contracts.
If you go to Bitcoin’s landing page, it’s obvious they want you to use the currency. That’s the main focus. But on the Ethereum Project, the main focus is something called “smart contracts.”
Ethereum’s pitch is this: Build apps on our blockchain platform.
What kind of apps? Anything, really. Any app that traditionally runs on the internet can be redeployed on the Ethereum platform. Doing so ensures that your app will have ZERO “downtime, censorship, fraud or third party interference.” (Source: “Ethereum,” Ethereum, last accessed May 24, 2017.)
But in order for there to be commerce on the platform, Ethereum tokens will need to be used. Ether is the native currency of the Ethereum platform.
That’s why speculators are betting on Ethereum. They believe it has far more potential to revamp the current way we live, shop, and do business. Unlike Bitcoin, it’s not just selling a currency.
Oh, and I forgot to mention, Ethereum’s transaction times crush Bitcoin’s.
It takes a few seconds to send money via Ethereum, whereas Bitcoin transactions can often take 20 minutes or more.
A gathering of Bitcoin investors and developers recently came to an agreement that might speed up Bitcoin’s transfer times, but I doubt they can catch up with Ethereum. The gap is too wide.
Will Ethereum Benefit from Bitcoin Hard Fork?
Bitcoin is running into some major issues that can’t be avoided.
To put it simply, there was a bug in the original Bitcoin code. This bug placed an artificial limit on the size of blocks, which led to slower transfer times, backlogs, and an inability to scale up the currency.
It is effectively a cancer on the entire Bitcoin dream.
One way to (potentially) fix the bug is a “hard fork.” This would require a fundamental change in Bitcoin’s original source code, a move that many in the community consider sacrilegious.
It would split the Bitcoin community in two, and more importantly, split the currency in two.
One would continue trading under the ticker symbol “BTI.” The other would come into existence as “Bitcoin Ultimate” or “BTU.”
These problems have diverted investors toward its heir apparent: Ethereum.
But don’t think that Bitcoin developers are sitting idly by, waiting to hand over the top spot. Not a chance. They are trying to work out the kinks as you read this.
Some of the most important players just convened a special meeting. They decided on a “soft fork” that would speed up transactions without altering the source code much.
It’s a half-measure.
I seriously doubt that a soft fork will hold forever, which means that Bitcoin is probably going to hard fork its currency. It wouldn’t be the first.
Litecoin just did the same thing, and Ethereum itself forked many times in the last year. Both of those cryptocurrencies survived the split, so I expect Bitcoin will survive as well.
That being said, I expect a bumpy ride. The Bitcoin community is deeply divided over the hard fork, so there’s bound to be some turbulence. In those moments of uncertainty, investors could once again turn to Ethereum as a safe-haven asset.
To sum up: I don’t think the hard fork will destroy Bitcoin, but it could give Ethereum another tailwind.
Will Ethereum Prices be Higher in 2018?
This is the hardest question to answer.
Many insiders believe that cryptocurrencies are in a bubble right now. But those people have been wrong before. Ethereum and Bitcoin have powered to new all-time highs even after they predicted a so-called bubble, so listening to them might be a waste of time.
I’m certainly more bullish on Ethereum price prediction than I am on Bitcoin.
It has the upper hand, in my opinion, because the concept of smart contracts is seeping into the public consciousness. Once it takes hold fully, ETH prices could skyrocket even higher.
Bitcoin, on the other hand, is stuck in old debates. Philosophical debates. Is it immutable? Are the mathematical proofs pristine? Never mind that its transaction fees are going through the roof, and its backlog is getting ever-longer. Those concerns aren’t as relevant as the purity of the public ledger. (/sarcasm)
One of the core Bitcoin developers, Mike Hearn, left the community last year specifically because of these issues.
He wrote a lengthy post about it, in which he warned that “Bitcoin has entered exceptionally dangerous waters.” (Source: “The resolution of the Bitcoin experiment,” Mike’s blog, January 14, 2016.)
He argues that Bitcoin’s technology is hitting a ceiling, and that mining new coins is no longer economical. Similar claims are made all the time, but his words carry weight. Naturally, there was vicious strike back.
Those of you with technical chops should read the accusations and rebuttals. (Source: “Whiny Ragequitting,” Medium, January 16, 2016.)
It makes for interesting reading. For my part, I sympathize with Hearn. He makes an interesting case that Bitcoin has lost its way. I don’t agree with all his points, but it definitely solidifies my case for Ethereum over Bitcoin.
As someone with finance and economics in their background, I’m not a “Kool-Aid” drinking techie. I don’t fall head over heels for new gadgets. I don’t buy into every new startup trend, and I don’t believe cryptocurrencies will replace traditional fiat money.
Here’s what I DO believe:
- I believe that central banks will regulate against cryptocurrencies.
- I believe that cryptocurrencies that improve payment transfers will survive.
- I believe that cryptocurrencies with smart contracts will survive.
- I believe that Ethereum can reach $500.00.
- I believe Bitcoin will never achieve universality.